Whether provisions without actually wiring off the book debts can be allowed as deduction is the most common issue in various proceeding wherein bad debts is claimed as deduction .

The same issue was there in ITA Nos. 1725-1726/Ahd/2019 related to Trio Elevators Company (India) Ltd Vs DCIT.

Let us have a short over view of the case.

Assessee in the present case is a limited company and engaged in the business of selling, erection, installation and repairs & maintenance of elevators.

 The assessee in the year under consideration has claimed the deduction on account of provision for doubtful debts and doubtful advances amounting to Rs. 24,31,091/- and Rs. 2,15,496/- under the provision of 36(1)(vii) and section 37 of the Act.

However, the AO was of the view that the assessee has just created the provision for doubtful debts and advances which cannot be allowed as a deduction.

According to the AO, as per the principle laid down by the SC in the case of Vijaya Bank vs CIT is different from the present facts of the case in as much as the word provision was not used by the bank while writing off the bad debts.

The AO also observed that the conditions specified u/s 36(2) of the Act, with respect to the provision for doubtful advances has not been complied with, therefore the same cannot be allowed as deduction.

The AO disallowed the claim made by the assessee for the provision of doubtful debts and doubtful advances aggregating to Rs. 26,46,587/- and added to the total income of the assessee.

On appeal, the issue before the Tribunal was whether deduction for provision of doubtful debts merits being allowed, where assessee has not written off such provision in ledger a/c of sundry debtors, since it may stand to lose right in civil proceedings for recovery of dues.

ITAT observed as under:

++ It is also important to note that the assessee has not written off the provision for doubtful debts in the individual ledger account of the sundry debtors for the reason that it will lose it right in the Civil proceedings for recovery of its dues from the sundry debdtors.

This argument of the A.R was not controverted by the DR for the assessee at the time of hearing. Accordingly, we hold that the assessee is entitled to the deduction for the provision of doubtful debts in the given facts and circumstances;

++ Regarding the provision for doubtful advances, we note that the same stand on the footing of doubtful debts as long as they were given in the course of the business. Therefore, on the same line of reasoning we also hold that the assessee is allowed for the deduction of the provision for doubtful advances under the provision of section 37 of the Act.

In view of the above and after considering the facts in totality we reverse the order of the authority below and direct the AO to delete the addition made by him.

Hence the ground of appeal of the assessee is allowed.